A Turbulent Week for Prediction Markets: Big Funding Wins, New Crackdowns, and Regulatory Chaos

On Wednesday, Kalshi CEO Tarek Mansour shared a viral clip to X showing six business-casual dressed men knocking out pushups on a public sidewalk. He captioned the post simply: “This is how Kalshi Q1 board meeting ended.” By the end of the unplanned outdoor cardio session, all the board members were laughing and grinning, radiating unmistakeable celebratory energy. It did not take long for the public to learn why they had every reason to celebrate: the event prediction platform had just closed a $1 billion funding round that valued the company at $22 billion — roughly doubling its on-paper valuation from just a few months prior.

The major funding win landed amid one of the most chaotic seven-day stretches the prediction market industry has ever faced. Over just five days, developments moved rapidly on multiple fronts: Nevada issued a temporary restraining order that temporarily paused Kalshi’s operations in the state; Arizona filed criminal charges against the company, accusing it of running an unlicensed illegal gambling business; an Israeli reporter reported being flooded with threats from Polymarket traders, who were enraged that a story he wrote shifted the odds on their active wagers; Polymarket itself secured a landmark partnership with Major League Baseball, deepening its foothold in U.S. professional sports; and a group of U.S. senators introduced new legislation that would ban specific types of contracts offered by the industry, including markets tied to “government actions, terrorism, war, assassination, and events where an individual knows or controls the outcome.” This bill is the latest in a series of regulatory proposals aimed at putting clear safeguards around the fast-growing prediction sector.

Senator Chris Murphy, a co-sponsor of the bill and one of the industry’s most outspoken critics, told WIRED in an interview that prediction markets are “a rigged and dangerous product,” and represent “a brand-new source of mind-bending corruption.”

Kalshi pushed back on the criticism in a statement from spokesperson Elisabeth Diana: “Kalshi already bans insider trading and markets directly tied to death and war. As a US-based exchange, we support regulators and policymakers from both sides of the aisle in their efforts to keep these markets safe and responsible in America.” Polymarket did not respond to multiple requests for comment for this story.

Existing U.S. law already grants the Commodity Futures Trading Commission — the federal agency that oversees legal prediction markets — the authority to ban offerings related to assassination, war, terrorism, and other topics deemed against the public interest. Most major platforms already avoid these categories, but vague line-drawing has led to high-profile confusion. When a market was launched tracking the fate of Iran’s supreme leader, many users incorrectly assumed the contract would pay out if he “left office” via assassination, creating a messy public controversy.

Polymarket, which runs most of its core operations outside U.S. jurisdiction, continues to host a wide range of war and political event markets that would be banned under the new proposal, and the federal legislation would not impact its offshore offerings. The platform currently runs an active market betting on whether Israeli Prime Minister Benjamin Netanyahu will leave office by specific target dates; one bettor recently placed a $177,000 wager that Netanyahu would be out of office by March 31. Just as Polymarket paid out winning bets on a similar market tracking former Iran leader Ali Khamenei’s death, the platform would resolve the Netanyahu market as “yes” and pay out winning bets if the prime minister dies before the deadline.

Insider trading risk is the core driver of Murphy’s crackdown push. Israeli authorities have already charged two citizens with leaking classified intelligence by placing Polymarket bets tied to the Iran conflict. Murphy, a Connecticut Democrat, suspects other insiders with access to classified U.S. military information — including members of former President Trump’s inner circle — may have executed similar trades tied to ongoing Middle East conflicts. “It's bone chilling to think that there are staffers inside the situation room that are pushing the United States into war, not because it's good for our security, but because they're going to make $100,000 off it,” he said.

The Trump administration has denied the allegation, saying no White House staffers have engaged in insider trading on prediction markets. “The only special interest guiding the Trump Administration’s decision-making is the best interest of the American people,” said White House spokesperson Davis Ingle.

While federal lawmakers continue pushing for new national rules, a growing wave of state-level legal battles is already reshaping how prediction markets can operate within U.S. borders. Nevada’s temporary restraining order against Kalshi, which follows an earlier ban on Polymarket’s U.S. operations, could force Kalshi to end all services in the state entirely. The criminal charges filed in Arizona this week also signal that state regulators are moving far beyond cease-and-desist letters and civil enforcement actions to pursue more aggressive crackdowns.

“These charges were filed to circumvent federal court and short-circuit the normal judicial process,” said Kalshi’s Diana.

Though the Arizona charges are classified as misdemeanors, legal experts say they could have industry-altering consequences. Gaming attorney Daniel Wallach calls state criminal charges a potential “kryptonite” for U.S.-based prediction platforms, because federal courts typically pause their own proceedings when active state criminal cases are ongoing. Wallach expects other states will likely copy Arizona’s approach if it succeeds.

Kalshi is already moving proactively to block similar action across the country. On Friday, the company filed a motion in Ohio court to block the state’s attorney general from pursuing civil and criminal charges while Kalshi appeals a ruling that found the platform must comply with Ohio’s existing gambling laws. “These charges are meritless, and we look forward to fighting them in court,” Diana said.

For onlookers following the week’s nonstop drama, there was one unusual light note to wrap things up: Polymarket is opening a pop-up bar in Washington, D.C. this weekend, creating a dedicated gathering space for fans to follow the latest prediction market news.